Bond news: IRS provokes roaring laughter w. Destiny Green Bond ruling / Nice model w. Morris C. distrib. solar / Fitch rates wind bond A-! / $50m Swedish wind bond / Alert: NYC Env Bonds Conf 25 May

Posted on 26. Mar, 2012 by in blog, Climate Bonds, Green Homes, United States

>You have to hand it to the US IRS (Internal Revenue Service) – they seem to have a sense of humour.

In 2004, the US Congress created tax-credits for Green Bonds for large construction projects that would serve as demonstrations of alternative energy technologies. In 2007 Destiny USA issued $228m in Green Bonds under the program to finance a “green” expansion of a big shopping centre in Syracuse NY.

But they didn’t follow through. According to Syracuse.com, it seems Destiny didn’t go ahead and install the energy saving technologies promised in their tax credit application “because of a downturn in the economy” – and would “probably never do so”.

The IRS decided to do an audit – good idea! But to the surprise of many of us they’ve decided the bonds are still compliant.

This is apparently because the federal law creating the program only required Destiny to describe the energy efficiency, renewable energy and sustainable design features planned for the project. It and didn’t require that they actually follow through! Go figure.

Hmmm. Investors get to keep their tax credits (perhaps they didn’t really care about the green credentials); and the developer gets release of $2.3 million they’d been required to hold in reserve as surety – and claims they’ve been “vindicated”. Well, they did at least recycle demolition materials and use rainwater from the building’s roof to flush toilets; on the other hand everyone – even Destiny – agrees they didn’t do what they promised to in their Green Bonds tax credit application.

Perhaps it’s an argument for stronger Standards for green bonds.

> Fitch has awarded an A- to a wind energy bond! Ok, it’s small – $13m – but this has to be one of the higher ratings a renewable energy bond has received. The issuer made all the difference here, but it’d be nice to think Fitch’s were beginning to appreciate the asset type.

> A $33m “Renewable Energy Program Lease Revenue Bonds has just been issued by Morris County Improvement Authority in New Jersey, USA. Wells Fargo Bank was the underwriter. Maturities ranged from 2 to 15 years. The bond supports the financing of 9.2MW of distributed solar photovoltaic projects across 27 sites throughout Morris County, including schools, libraries and other municipal buildings. It essentially aggregates a collection of smaller projects sop they can tap cheaper bond financing. Useful model for local authorities.

> A modest SEK 350m ($50m) corporate 3 year bond was issued by Swedish company Arise Windpower earlier this month. Floating interest rate is STIBOR (3 months) + 5.00 percentage points. Financial advisers were ABG Sundal Collier and Swedbank.

> An Environment Bonds NYC conference will be held on 23 May 2012, organised by Environmental Finance magazine — and yes I will be speaking. You get a 25% discount on registration (another special benefit of being a Climate Bonds fan!); registration details next week.

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